Auction Shock

Auction Shock

Private Property South Africa
Lea Jacobs

Although the legal procedures the National Consumer Commission followed during the Auction Alliance debacle have been found to be technically flawed and the rulings of the commission have been overturned, a report in the Weekend Argus revealed that Rael Levitt, the former CEO of what was the largest auction house in the country, did in fact rig the Quoin Rock auction. The written confession was obtained by the newspaper, which applied to the National Consumer Tribunal under the Promotion of Access to Information Act (PAIA).

In the confession, Levitt describes in detail how he and Ariel Gerbi, a property developer, hatched a plan to cover up the illicit goings on at the now infamous auction which pitted one of South Africa's richest women, Wendy Appelbaum against a ghost bidder. The story made headline news and although Levitt consistently denied any wrongdoing at the time, video footage taken during the auction clearly showed something was amiss. The latest news confirms that Levitt had attempted to rig the auction and that the plan included ideas on how to 'create the impression' that Gerbi had been a genuine bidder by adding his name to the bidders’ roll.

It now appears that Levitt not only used Deon Leygonie, a former Auction Alliance employee, as a vendor bidder but, upon realising that Appelbaum’s suspicions had been aroused, attempted to cover up the illegal activity. He admits meeting with Gerbi shortly thereafter and adding his name to the bidders’ roll. Appelbaum in the meantime was dissatisfied with the explanation given and reported the matter to the National Consumer Commission.

In his confession, Levitt mentions how ‘dismayed’ he was when Appelbaum started questioning the integrity of the process. When questioned as to whether Leygonie was a real bidder, Levitt said that he had read the rules and realised that it was against the rules to deploy Leygonie as a vendor bidder, contracted by Auction Alliance to raise the prevailing highest bid.

The confession alleges that Leygonie was bidding under false pretences and although he counter bid an additional R20-million on Appelbaum’s bid of R35-million, pushing the price up to R55-million, there was never an intention to honour the bid.

The plan backfired. "With hindsight, at the point at which I realised my error, I should have simply approached the complainant (Appelbaum) with a full explanation. Rather than doing this, I proceeded to act in a most foolish way that I now greatly regret," he wrote in his statement to the National Consumer Commission.

"I left the wine estate and went for lunch in the Stellenbosch area with a friend of mine, one Ariel Gerbi, "Gerbi is not only a friend, but has previously bought properties at AA auctions and has further mandated AA to sell properties on his behalf. "As a friend of mine and in order to assist me, Gerbi suggested I register him as a bidder, and I created the appearance that Leygonie was bidding on his behalf," he said. "I state that this form, while creating the appearance that it was in fact completed prior to the estate auction, was completed thereafter."

Before the confession came to light, Levitt repeatedly tried to muddy the waters, claiming that ghost bidding was perfectly legal. "The public has focused on ghost bidding as if it was unique to me ... 'Ghost' or vendor bidding happens every day, in every way, in every auction across the globe, from venerable art auctions in London, to real estate auctions in Sydney and cattle auctions in Texas," he said.

The above statement is untrue as there is a vast difference between a ghost bidder and a vendor bidder. Simply put, employing a ghost bidder is illegal while utilising the services of a vendor bidder is perfectly acceptable as long as all the other bidders in the room are aware of the fact.

The story, it seems, is not yet over and although the National Consumer Commission may have lost its case, others are still investigating and it has been reported that the Hawks are still probing the goings on of Levitt and Auction Alliance. Appelbaum may have put her finger on it when she stated, "It's unfortunate that my complaint failed on technical grounds. However, it's an issue of public interest. If my complaint made the perpetrators more nervous and the public wiser, then it was all worth it," she said.

It may never be known how widespread the practice of ghost bidding actually is and what effect the unscrupulous activity has on the auction industry as a whole. However, given how the Auction Alliance debacle has played out and the fact that the company has since gone out of business, it seems highly unlikely that spectres will be haunting auction rooms anytime soon.


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